Tax Planning
Maximizing Tax Savings with the One, Big, Beautiful Bill: Backup Withholding & 1099-K Thresholds
Proposed IRS regulations drastically change the rules around backup withholding and payment reporting for third-party networks—small sellers and platforms need to know whether the old $600 reporting trigger still applies.
By NomadicTax Research Team • 5-8 min read • April 6, 2026
## What’s Changing & Why It Matters
The **One, Big, Beautiful Bill Act (OBBBA)** rolled back certain reporting thresholds that had been lowered by the American Rescue Plan Act. Specifically: the threshold for issuing a **1099-K** (used by third party settlement organizations to report payments to individual payees) now returns to the pre-ARPA level — that means reporting is only required when both:
- Gross reportable payment transactions to a payee **exceed $20,000**, *and*
- **More than 200** individual transactions occur in a calendar year. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-reflecting-changes-from-the-one-big-beautiful-bill-to-the-threshold-for-backup-withholding-on-certain-payments-made-through-third-parties?utm_source=openai))
Prior to OBBBA, platforms needed to report payments exceeding just $600 regardless of transaction count. This change brings important relief for gig workers, sellers on small platforms, and other low-volume payees. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-reflecting-changes-from-the-one-big-beautiful-bill-to-the-threshold-for-backup-withholding-on-certain-payments-made-through-third-parties?utm_source=openai))
Also, OBBBA updated the rules around **backup withholding** for payments made through third‐party networks. With these changes, backup withholding generally only kicks in under the same dual threshold conditions. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-reflecting-changes-from-the-one-big-beautiful-bill-to-the-threshold-for-backup-withholding-on-certain-payments-made-through-third-parties?utm_source=openai))
## Who’s Affected & What To Do
| Actor | What to Know | What You Should Do Now |
|-------|--------------|--------------------------|
| **Small sellers / gig workers / artisans** | If you receive payments via payment apps or platforms, you aren’t automatically subject to reporting or withholding unless you cross both the $20,000 and 200-transaction lines. | Keep records of **both** transactions *and* payment totals. If either metric approaches the threshold, plan for reporting obligations. |
| **Third-Party Settlement Organizations (TPSOs)** | Platforms must track and report when recipient payees surpass both metrics before issuing Form 1099-K and possibly backup withholding. | Update internal systems to monitor both number of transactions and aggregate dollar volume per payee. Educate end users. |
| **Tax preparers & advisors** | Clients may no longer receive 1099-Ks for smaller volumes, which means income must be tracked elsewhere. | Ask detailed questions about their platform activity; ensure other proof—bank statements, platform dashboards—are available for clients without 1099-Ks. |
## Practical Examples
- **Leah** sells handmade jewelry and receives $15,000 in 180 transactions through an app. Under new rules, she’ll get **no 1099-K**—but she still owes income tax on all revenue.
- **Carlos** runs a tutoring service collecting $22,000 via 250 small payments via an app—he would now receive a **1099-K** since **both** thresholds are exceeded.
- **Platform A** must ensure its system tracks both total dollars and transaction counts, or face reporting failures.
## Actionable Tax Planning Tips
1. **Track everything**—not just revenue, but how many payments you receive. Invoices, statements, and platform summaries matter.
2. If close to thresholds, consider whether to consolidate transactions or manage volume across multiple payees correctly.
3. Keep records even when 1099-Ks aren’t issued—because lack of a 1099 doesn’t eliminate tax responsibility.
4. Consult with a tax pro if you operate a small business or side hustle—and double check whether both thresholds are or will be met.
## Bottom Line
These proposed changes under OBBBA restore a higher threshold for 1099-K and backup withholding rules—only applying when **both** payments exceed **$20,000** *and* there are more than **200 transactions**. While this reduces reporting burden for many, it increases the need to track income accurately even without that form. Making sense of the rules now can prevent surprises when filing in 2027.